New coordination program in healthcare law pleases hospitals, irks employers and insurers

Democrats suffered a black eye back in April when hospitals and clinics that were among their strongest allies on healthcare reform slammed an initial proposal as being too burdensome and offering too few incentives. Medicare officials on Thursday highlighted the changes they've made since then.

"We feel that we have struck a better balance between creating a strong business case for providers who want to participate [while] at the same time not taking away the patient protections … included in the proposed rule," Jonathan Blum, director of the Center for Medicare, told reporters on a conference call.

The reaction from those providers was much more positive Thursday after regulators increased potential rewards and minimized financial risk, pared down quality reporting measures and generally made it easier for ACOs to form.

"In response to the concerns of the [American Hospital Association] and its hospital members, CMS made significant changes to the financial model, provided more flexibility in the assignment of beneficiaries and took a second look at the quality framework," AHA President and CEO Rich Umbdenstock said in a statement. "We believe today's menu of ACO options allows America's hospitals to create new models of accountable care organizations on which the transformation of health care delivery is so dependent."

The American Medical Association said it was "pleased that the final rule on Medicare Accountable Care Organizations (ACOs) includes many of the important changes recommended by the AMA to allow all interested physicians to lead and participate in these new models of care."

Other healthcare groups weren't so thrilled.

The insurance lobby raised concerns that the new rules weakened antitrust protections that prohibit extreme consolidation in the healthcare sector. Insurers say they're falsely accused of driving healthcare costs up when large hospital systems with too much pricing clout are to blame.

"The initial regulation created an antitrust screening mechanism that would have protected consumers with a mandatory up-front antitrust review and exclusion from the program for those ACOs facing a legal challenge," America's Health Insurance Plans said in a statement. "Doing away with the mandatory review process raises concerns that provider market power may not be scrutinized sufficiently, potentially increasing health care costs for consumers and employers."

The American Benefits Council, which represents employers, called itself "deeply disappointed" by the changes to the antitrust provisions.

"The final rule includes a clear recognition that not all ACOs will benefit consumers and reinforces that existing antitrust rules will be vigorously enforced," council President James Klein said. "But words alone will not be sufficient to ensure that consumers and purchasers are protected from unjustified price increases, lower quality care or restricted access to health care providers and services."

And the medical device industry called the rule a "missed opportunity" that fails to ensure that ACOs don't stint on care to hit their savings targets.

Ann-Marie Lynch, executive vice president of the Advanced Medical Technology Association, said the association was "concerned the rule does not address the very real danger of slowing the development of new treatments and cures.

"The failure to consider how innovative products play an important role in improving patient care threatens medical progress for current and future patients," she said. "Without certain design elements, the ACO program may have the effect of limiting treatment options and discouraging physicians from adopting new advancements in care."